Repeal of individual mandate threatens health of state ACA marketplace

CMS to cut Essential Plan funding

The Centers for Medicare and Medicaid Services has told the state Department of Health that it will not be fully funding the Essential Plan for the next year's first quarter, a state budget spokesman confirmed Friday.

CMS will not pay the portion of its obligation tied to cost-sharing reduction payments, which the White House scrapped in October. That reduction, one-fourth of the funding, represents an $870 million hit to the state budget for 2018, according to an October estimate from the Greater New York Hospital Association. Nearly 710,000 people had enrolled in the Essential Plan as of Dec. 6.

CMS' communication to the state about reducing the size of its payment was first reported by Politico New York.

Without the funding, the future of the program is unclear. "The potential impact on the Essential Plan is still being evaluated," the spokesman said. He noted the state has not yet received written communication from CMS stopping the payments.

In New York, the cost-sharing reduction payments fund one-quarter of coverage for people earning up to 200% of the federal poverty level, $49,200 for a family of four, who don't qualify for Medicaid because of their income or immigration status.

The remaining three-fourths are covered by the advance premium tax credits that would have otherwise subsidized these customers' insurance on the exchange.

Bill Hammond, director of health policy at the Empire Center in Albany, said he expects the state to preserve the Essential Plan at least through the end of next year.

"In the short term, I don't foresee anybody losing their coverage because it would be so politically wrenching for [Gov. Andrew] Cuomo and the Legislature to do something like that," he said. "They're going to continue hoping that Congress steps in and revives the CSR program." —J.L.

MSK to issue nearly $305M in bonds

Memorial Sloan Kettering Cancer Center is expected to sell $304.9 million in tax-exempt revenue bonds today to help finance its ambitious plans for ambulatory-care construction in Manhattan and on Long Island. The bonds will be issued through the state Dormitory Authority.

S&P Global Ratings assigned the debt an "AA-" grade, its fourth-highest rating, indicating a "very strong" probability that MSK will meet its commitment to bondholders.

The health system has $2.2 billion in debt outstanding, according to Moody's, which rated the new bond offering "Aa3," a comparable rating to S&P's.

Memorial Sloan Kettering has two major capital projects underway. Its $1.5 billion David H. Koch Center for Cancer Care on East 74th Street, bordering the FDR Drive, is expected to be completed in 2019. The cancer hospital is also building MSK Nassau, an $180 million, 114,000-square-foot outpatient cancer center in Uniondale, Long Island, which is expected to open in September 2019.

Both S&P and Moody's said that future credit ratings would be influenced by the success of those projects.

The rating reflects "improved operating results through the nine-month interim period ended Sept. 30, 2017, following some margin compression and slight deficit operations in fiscal 2016," Stephen Infranco, an S&P analyst, said in a statement.

S&P does not consider investment income and philanthropy as part of operating revenue, as MSK does in its financial statements, so the ratings agency considers the cancer hospital to have a small operating loss, not the $205.6 million in operating income it reported through September 2017. S&P said it doesn't consider the operating loss a negative factor in its rating, "as the loss remains manageable within the context of MSKCC's nonoperating income sources." —J.L.

New Jersey sleep center reports data breach

More than 16,000 patients may have been affected by a ransomware attack at Hackensack Sleep and Pulmonary Center in Hackensack, N.J., according to a filing with the U.S. Department of Health & Human Services' Office for Civil Rights.

The sleep center, which HHS disclosed Nov. 28, posted on its website that it is "unaware of any actual breach" of its patients' personal and health information. "Typically, these ransomware programs do not seek to steal patient data but instead are used to extort the parties hacked into paying money to recover locked files," the web posting read.

On Sept. 24 the center's electronic medical record system was infected with a ransomware virus. The breach was discovered the following day. "The virus encrypted (locked) our electronic medical record files, and the attacker demanded a ransom to 'unlock' the files," according to the center's website. Rather than pay the ransom, Hackensack Sleep restored the files by using an unaffected offline backup copy.

The electronic medical records include all medical records and personal identifiers such as dates of birth and social security numbers.

The center contacted the New Jersey State Police Cyber Crimes Unit and hired a computer forensics expert, and it is putting in place new security measures. It also encouraged its patients to review account statements, social security correspondence, health insurance account records and explanation-of-benefits forms for suspicious activity.

Crain's called Hackensack Sleep for comment but did not receive a response by deadline from someone authorized to speak on the matter. —R.S.

AT A GLANCE

MEDICAL MARIJUANA: The state Health Department filed new regulations Friday for New York's medical marijuana program. The rules, which take effect Dec. 27, permit the sale of additional medical marijuana products, offer an improved experience for patients and visitors to dispensaries, and allow the department to approve new courses that provide training for practitioners over a shorter time period. The new products include topicals, such as ointments, lotions and patches; solid and semi-solid products, including chewable and effervescent tablets and lozenges; and certain nonsmokable forms of ground plant material.

HEALTH POLL: According to a new Gallup poll, 56% of Americans—the highest level in 10 years—say the federal government should be responsible for ensuring that all Americans have health coverage. Last year 52% expressed that sentiment.

HIGH DEDUCTIBLES: A study published in the American Journal of Managed Care shows the growing prevalence of consumer-directed health plans with higher deductibles might not lower health costs. The plans, which require consumers to contribute more toward their medical expenses, had "little to no effect" on lowering spending for 26 low-value services, according to researchers at the University of Southern California Schaeffer Center for Health Policy and Rand Corp.

Repeal of individual mandate threatens health of state ACA marketplace

Come New Year's Day, the Affordable Care Act will still be standing, but it could be badly wounded.

As Congress nears passage of a tax overhaul that would repeal the individual mandate, New York's individual insurance market may start seeing the impact by late 2018. That's when younger, healthier customers will begin weighing whether to buy coverage for 2019 if they no longer face a penalty for not having insurance. The mandate was a cornerstone of the Affordable Care Act.

If the mandate is repealed, New York health plans would surely request significant premium increases from the state Department of Financial Services for 2019.

A case in point: Faced with the possible repeal of the ACA earlier this year, DFS asked insurers to estimate how much they would increase premiums if the individual mandate was repealed. On average, they said, they would have needed an increase of 32.6% on top of the 14.5% average hike they were already granted.

Scrapping the mandate would return the state to a situation it faced before the ACA, when it prohibited insurers from charging higher premiums to sicker customers but did not penalize people who didn't buy coverage. The market shrunk to about 21,000 members, and monthly premiums soared by about $1,000 for individuals.

"We saw what New York looked like without an individual mandate, and the individual market went into a death spiral," said Paul Macielak, president of the New York Health Plan Association.

Macielak is hopeful that a federal bill, such as the one proposed by Sens. Lamar Alexander and Patty Murray, will help stabilize the marketplace by funding subsidies to insurers that cover consumers' copays and deductibles. The payments contribute $870 million to New York's Essential Plan, a product that provides lower-income people free or low-cost coverage. Enrollment in that plan is nearly 710,000.

Predictions from President Donald Trump that Obamacare is "imploding" haven't hurt the popularity of health plans on the NY State of Health marketplace. As of Dec. 6, enrollment for next year was outpacing last year's by 13%. "The swift pace of enrollment shows that New Yorkers want the protection that health plans offered through NY State of Health provide," Donna Frescatore, the marketplace's executive director, said in a statement.

Because it runs its own marketplace, New York hasn't suffered from some of the federal actions meant to hobble the health law. The state is keeping enrollment open for 12 weeks, until Jan. 31, double the time of federal marketplaces. It also funds its own marketing and outreach efforts. The Trump administration cut advertising spending 90%, to $10 million, and funding for navigators who help people sign up by 70%, to $37 million, for federal markets.

While some U.S. counties have just one insurer selling ACA plans, city residents still have seven to choose from. And that's despite the fact that two insurers, Northwell Health's CareConnect and Affinity, stopped selling Obamacare plans this year, with Northwell leaving the insurance business entirely.

Insurance woes won't be limited to the individual market next year, however. Employers are facing increased benefit costs as well, albeit at a much lower rate. Metro area companies with 500 or more employees said they expected their benefit costs to rise 5% in next year, according to a survey of 125 organizations conducted by Mercer.

Rita Numerof, co-founder and president of the health care consulting firm Numerof & Associates, said she expected continued cost hikes for employers due in part to unnecessary and inefficient medical care.

"When you think about every other industry, with the introduction of new technology you get more and more features at less and less cost." In health care, she said, "the trend is always up." —J.L.

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